TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/757209
TH E M R EP O RT | 59 O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T SECONDARY MARKET THE LATEST Government Fights Document Release in GSE Profit Suit Presidential privilege was cited for a portion of the documents. T he government has fought back in the battle over Fannie Mae and Freddie Mac profits. In September, Judge Margaret Sweeney in the U.S. Court of Federal Claims ordered the U.S. Department of Treasury to release 56 documents related to the sweeping of GSE profits into Treasury in a shareholder lawsuit. The government is refusing to release the documents, however. The government asked the U.S. Court of Appeals for the Federal Circuit to issue a writ of manda - mus seeking to have Sweeney's order reversed. A writ of manda- mus is a direct order to a lower court that is considered a drastic and extraordinary measure—one typically only used if an abuse of discretion has occurred. Sweeney's ruling required the government to turn over the 56 documents to Florida-based mutual fund Fairholme Funds and other GSE shareholders. According to Fortune, presidential privilege was cited in the govern - ment's decision to withhold four of the 56 documents ordered to be released which were either authored or sent to then-National Economic Council Director Gene Sperling, who in May 2016 was named Hillary Clinton's top eco - nomic advisor. The GSEs' bailout agreement was amended in August 2012 to require all of Fannie Mae's and Freddie Mac's profits to be swept into Treasury quarterly. The original agreement required only a 10-percent dividend to be paid to Treasury annually. The Net Worth Sweep, as it has come to be known, has prompted close to two dozen lawsuits from GSE investors who claim the sweep is illegal. In April 2016, Sweeney ordered the unsealing of seven documents related to the Net Worth Sweep that seem to suggest that key government officials (namely the CFO at Fannie Mae at the time, Susan McFarland) knew that the GSEs were on the brink of major profitability in the summer of 2012 right before the bailout agreement was amended. Fannie Mae Promotes Clear Boarding Over Plywood A new allowable finds plywood method "unacceptable" for securing vacant properties. T he progress that clear boarding has made over the last few years when it comes to replacing plywood as the go-to method for securing vacant homes has been steadily picking up steam. Now, that progress appears to have kicked into overdrive. Jake Williamson, Vice President of Real Estate Fulfillment at Fannie Mae, announced at the National Property Preservation Conference (NPPC) in Baltimore, Maryland, a new allowable from Fannie Mae that promotes the use of clear boarding on pre- foreclosure properties. Fannie Mae has been using polycarbonate clear boarding to secure vacant homes since early 2014 and as of this summer, it had been installed in about 4,000 Fannie Mae properties. Fannie Mae started using clear boarding in four states originally—Illinois, Florida, Ohio, and Michigan. The new allowable finds the use of plywood unacceptable when securing vacant properties. Now all vacant properties owned by Fannie Mae will be required to be secured by an alternative to plywood, whether in pre- or post-foreclosure state, or REO as of November 9. There will be a 90-day adoption period for servicers and vendors to apply the new rule going forward, according to Fannie Mae. Five Star Institute president and CEO Ed Delgado was at the conference moderating a panel on the state of the housing industry and commented upon hearing the news. "This is a major step forward for the cause of curbing urban blight across communities," Delgado said. "The application of plywood to a property is a tell- tale sign that the home is vacant and advertises it as a potential haven for criminal activity. Removing plywood from the equation while advancing clear boarding is a game-changer." The use of clear boarding is expected to greatly reduce the problems that often result from using plywood to board up windows on vacant properties, such as community blight, lower property values, vandalism, squatters, and violent crime. Despite the higher up-front cost, the rationale is that servicers will actually save on costs in the long run because of the product's ability to maintain the value of the property and to shorten the disposition process. "Eighty percent of the issues that the industry has with the conveyance timeline are resolved when the industry moves toward clear boarding," said Robert Klein, Founder and Chairman of Safeguard Properties and Founder and CEO of Community Blight Solutions. "This move will have a tremendous impact on ensuring that properties return to the market in a more stable and marketable condition." Brandon Johnson, CEO of property preservation company GTJ Consulting in Detroit, told DS News in May 2016: "We try to explain that the benefits, in our mind, far outweigh the additional cost, because it's a long-term solution. You can't get in, you can't break through it, and it withstands the elements. It doesn't disintegrate over time, and it looks much better, because when you drive by, you can't even tell that the property is boarded up. On a number of levels, we feel it's a great product, and a definite step forward in the urban fight against blight for communities."